Steel Mills

Can US Steel Canada Survive on Its Own?

Written by Sandy Williams

US Steel Canada and its parent company US Steel Corp. are parting ways but uncertainty about the future of the Canadian steel mill lingers.

In a Superior Court decision last week, Justice Herman Wilton-Siegal agreed to sever the connection between the companies and allow US Steel Canada to suspend health care benefits to more than 20,000 retirees. Hamilton will no longer receive property taxes from USSC, amounting to about $6 million annually.

Wilton-Siegal gave his reasons for approving the separation in a 38 page document on October 14. In his concluding remarks he said that the order will “close the book on USS involvement in the operational affairs of USSC.”

“The reality facing the stakeholders is that, going forward, given that USSC no longer has any support from USS apart from the temporary support to be provided under the Transition Arrangements, acceptance of the economic reality in which USSC finds itself today, and consultation and co-operation among the principal stakeholders, will be crucial for the survival of USSC.”

Wilton-Siegel stated the parties should set aside their contentious issues and “focus instead on the future of the newly-independent USSC.”

An issue that has not been set aside is that of the 2011 “secret agreement” between US Steel and the Canadian government. An agreement was made between the parties that led to the federal government dropping a suit against US Steel for breaking commitments made during purchase of the Stelco assets. Stakeholders were rebuffed in their previous attempts to have the text of the deal revealed. Justice Wilton-Siegal ruled that he did not have authority to release the confidential agreement. The Ontario Court of Appeal has now granted a hearing to review that decision.

Whether or not the company can continue to operate without its automotive contracts and support by US Steel is up for debate.

The USW leaders at Hamilton and Lake Erie Works say they are interested in forming a new company to operate the mills and return to the former name Stelco.

Local 8782 President Bill Ferguson said, “I think it could make a go. The big problem now is steel orders being moved to the U.S. We could better keep the orders here with an independent company.”

“There’s a real sense that we have the opportunity to move forward now,” he said.

Relief from the payment of health benefits and taxes will allow the company to keep going for the time being, but the downturn in the steel market makes it problematic for the company to get back on its feet any time soon.

The separation from US Steel results in the loss of 40 percent of the production designated for automotive contracts. With the shaky financial standing of US Steel Canada, it is not likely that commitments for new contracts will be forthcoming.

US Steel Canada remains under the Companies’ Creditors Arrangement Act and currently has sale of the Hamilton and Lake Erie assets on hold until the market improves. With US Steel removed from the bidding process, some believe that new bidders will be attracted to the company.

In the meantime, as election campaigning proceeds in Canada, Conservative and Liberal parties are taking potshots at each other over the steel mill’s plight. Steel Market Update asked Conservative Federal Industry Minister James Moore if there was any possibility of the government taking ownership until the company regains its strength or could be sold, but did not receive a comment.

Ontario Finance Minister Charles Sousa offered $3 million from the province for “a transitional fund” administered by the USW and US Steel Canada. The transitional fund is expected to cover the health care costs of the retirees for six months.

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